Diabetes mellitus is caused by absolute (type 1) or relative (type 2) deficiency of insulin-secreting islet β cells. An ideal treatment of diabetes would, therefore, be to replace the lost or deficient β cells, by transplantation of donated islets or differentiated endocrine cells or by regeneration of endogenous islet cells. Due to their ability of unlimited proliferation and differentiation into all functional lineages in our body, including β cells, embryonic stem cells and induced pluripotent stem cells are ideally placed as cell sources for a diabetic transplantation therapy. Unfortunately, the inability to generate functional differentiated islet cells from pluripotent stem cells and the poor availability of donor islets have severely restricted the broad clinical use of the replacement therapy. Therefore, endogenous sources that can be directed to becoming insulin-secreting cells are actively sought after. In particular, any cell types in the developing or adult pancreas that may act as pancreatic stem cells (PSC) would provide an alternative renewable source for endogenous regeneration. In this review, we will summarize the latest progress and knowledge of such PSC, and discuss ways that facilitate the future development of this often controversial, but crucial research.